The race to find the next big thing in PropTech is well underway. While disruptors such as Uber, Airbnb and Aldi have shaken up their respective industries, commercial real estate (CRE) has somewhat lagged, sticking to ways of design and construction that have barely altered in almost a century. Yet change is finally afoot as the 2020 CRE Innovation Report from Altus Group shows.
This year’s report, compiled from Altus Group’s annual surveys of 400 senior executives across leading companies worldwide, shows that PropTech has surged to the forefront of CRE leaders’ minds. Now regarded a number one issue instead of some futuristic concept without great practical value, PropTech disruption is widely believed by CRE leaders to be “at tipping point”.
Of major concern among executives, the survey found, is how the CRE is using data and technology, and impacting the sector. Key findings were:
- the belief that 5G wireless technology will create major disruptive change
- 75% of CRE executives see automation eliminating jobs
- productivity is being harmed by inefficient use of important data – and therefore data strategies and employing data managers is imperative
- Australia’s CRE market stands out for its criticism of regulatory requirements creating impediments to using data
- Australia does not appear as concerned about the impact of automation in the CRE industry on jobs as other countries. In the United States, 81% of respondents thought it was very likely that AI would eliminate jobs but in Australia it was 67%.
The story has changed fast: back in 2018, Altus Group’s CRE Innovation Report found only a minority of commercial real estate (CRE) executives believed disruptive technologies could spark major change and cause potential challenges. But the rise of disruptive technologies and industries such as co-working spearheaded by the likes of WeWork, Regus and others, quickly made it clear uncertainty was the only certainty, and by 2019 the annual report was painting a very different picture again. In that report, sentiment of senior level CRE executives had changed markedly, just over half intending or having invested in at least one type of PropTech firm. About one-fifth of respondents also reported they were using artificial intelligence and almost two thirds were automating internal and external processes.
As awareness has risen so have levels of PropTech investment. The sector attracted just $20 million worth of investment in 2008. Today that figure is closer to $4 billion.
Little wonder leading CRE players are paying keener interest to technological innovations that are no longer nipping their heels but taking hold.
Taking the reins
In one approach to the PropTech race, CRE North American giant Oxford Properties recently extended its annual Hackathon in Toronto to encompass its offices worldwide. The Hackathon was established three years ago to find practical, scalable innovations with the potential to bolster the company’s developments, and in late 2019 took place in Boston, London and Sydney for the first time as well as Toronto. More than 500 people from start-ups and other industries gathered to find solutions to several challenges set by Oxford for the chance to win a cash prize plus an opportunity to collaborate with the global real estate investor, developer and manager. For each of the Oxford Properties head offices involved, the benefit was uncovering local talent in the local region.
Oxford Properties COO Dean Hopkins said technological disruption was still “nibbling away” at CRE. But its impact was imminent. “Other industries that have been disrupted have reached a point of maturity and now people are asking ‘what else should we disrupt?”, said Mr Hopkins who described the goal of Hackathon participant’s as thus: “The global construction industry is projected to exceed $15.5 trillion by 2030. With that massive scale comes a massive opportunity to innovate, and Oxford Properties challenges you to help transform the way we plan, design, and construct buildings. How might we design for Oxford to capture a significant share of that $15.5 trillion in the next 10 years by challenging the status quo of the building-development process?” Even if the company could make its real estate developments 5% or 10% better or more efficient it would substantially ‘move the needle’, Mr Hopkins pointed out.
For 48 hours Hackathon participants beavered away on creating solutions around three specific areas – design process optimisation; data-driven materials cost analysis; and agile versus lean project management. The best ideas from each city were then invited to be pitched to a panel of executives, tech entrepreneurs and architects. The chosen few included:
- An augmented reality (AR) powered building management system allowing maintenance crews to pinpoint as well as see mechanical equipment behind walls
- A user-driven review database to improve cost factors and user satisfaction regarding materials and finishes
- An artificial intelligence (AI) mechanism that employed data from previous construction jobs that would lead to greater efficiencies in future projects
The winning idea was the user-driven review database, devised by the Toronto team. The Sydney team also figured prominently among the winners thanks to its AI-powered materials-cost management tool that allowed users to quickly compare materials and optimize cost, effectively notifying them if a design met building code requirements. The Boston team also impressed the panel with an innovation that analysed all Oxford’s building cores to generate a series of sample core layouts that were currently being built from scratch each time a new project was rolled out.
The results reflected recent industry observations, with Deloitte Insights 2020 outlook selecting AI among its five key areas set to influence CRE in the future. “AI can not only enhance operational efficiency but also help identify risks and opportunities much more quickly than current technologies and processes can,” Deloitte analysts observed